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Indian demand scenario The consumption growth rate in the 90s has consistently been on the higher side. Domestic demand for polymers recorded a CAGR of 15% in last three years. Demand growth can sustain high levels for a long period. India’s low per capita consumption of petrochemicals indicate the tremendous latent demand growth potential. Consumption of petrochemicals ( '000 tons) LDPE/LLDPE HDPE PP PVC 1994-95 330 410 295 445 1995-96 370 450 330 500 1996-97 400 490 430 560 1997-98 460 490 590 630 Comparative per capita consumption (kg) Country Polymer PE PP PVC India 2 0.7 0.7 0.6 China 7.5 NA NA 2.3 USA 40.8 14.7 8.3 17.8 World Avg. 17.5 NA NA NA Asia Avg. 10 3.6 3.5 2.9 On the basis of their peculiar features and end use, petrochemicals can be classified as polymers (plastics), synthetic fibre, synthetic rubber or industrial chemicals (see annexure). Amongst these groups, polymers (HDPE, LLDPE, LDPE, PP) are the most important ones as they constitute 70% of petrochemicals consumed. Demand For Petrochemicals Is Driven By Various Factors. Greater urbanization increases the demand for polymers. In a country like India where the middle class segment is growing at a rapid space, demand is expected to grow at a high rate. Application of plastics in a wide number of industries and products fuels the demand. Plastics have penetrated into areas of packaging materials, agriculture, wires and cables, medicare applications, and household articles. Increase in prices of conventional resources due to their limited availability, helps in driving the demand of polymers, a substitution effect. To a certain extent even the limited uses of conventional materials, fuel the demand for polymers. In the pre-liberalization era, consumption of petrochemicals was stunted because of its non-availability and non-affordability. Import duties were high (100-200%). In the post-liberalization era, after the gradual reduction of excise and customs duty, demand for petrochemicals has been growing. Excise duty Year PE PP PVC 1993-94 35.0% 35.0% 35.0% 1994-95 30.0% 30.0% 30.0% 1995-96 25.0% 25.0% 25.0% 1996-97 25.0% 25.0% 25.0% 1997-98 25.0% 25.0% 25.0% 1998-99E 25.0% 25.0% 25.0% 1999-2000E 24.0% 24.0% 24.0% Customs duty Year PE PP PVC 1993-94 65.0% 75.0% 45.0% 1994-95 65.0% 55.0% 45.0% 1995-96 40.0% 40.0% 40.0% 1996-97 30.0% 30.0% 30.0% 1997-98 30.0% 30.0% 30.0% 1998-99 35.0% 35.0% 35.0% 1999-2000 38.5% 38.5% 38.5% This fall in duties, both customs and excise spurred demand growth in the 90s. Prices of key polymers like HDPE and PVC fell from Rs45 per kg and Rs42 per kg in 1995 to Rs38 per kg and Rs28 per kg in 1998, respectively, making them more affordable. This was one of the reasons for demand recording a 15% CAGR in last three years. Other sector reports Previous chapter Next chapter

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